Bulls are cheering in the market. If you are just getting into the market after many months, you may want to wait until tomorrow. Labor Department’s monthly employment report will be released tomorrow. ADP employment estimate was released yesterday; that report predicted US employers shed another 532,000 jobs in May. Bloomberg survey of economists calls for 520,000 lost jobs in May and a 25-year high in the unemployment rate of 9.2%. If labor department report presents any positive surprise, the market will continue its rally. Otherwise, we will get decent amount of pullback.

This is a lesson that many investors have been taught before, but so many investors have a difficult time following: do not chase after a bear market rally. In the past three days the Dow has gained over 550 points and has risen back above 7,000. Many on Wall Street are now asking whether this is a real sign of the bottom or if this is simply another suckers rally like several others have been in the last few months.

The main lesson that everyone should understand is that in a market that has an economic backdrop like we have right now there simply is no reason whatsoever to chase stocks higher in the hopes that this is the beginning of a huge move.  The simple fact of the matter is even in a brutal bear market there are going to be some violent swings higher because no market is going to go in a straight line in either direction. In fact, bear market rallies are typically much quicker, but also more short-lived than bull market rallies.

With an economy that is bleeding jobs and consumers losing trust in the overall system there is no reason to believe this is the start of a strong bull market. I am not saying that the bear market isn’t getting close to over, for that is much harder to determine, but rather I am simply stating that any bull market that would come in the future will be very slow to develop because of the slow economic recovery.

Don’t feel the need to chase your favorite stocks higher during these bear market rallies. The stocks will have big up days and big down days, and it is up to you to make sure you buy them at the right time.

Every time the stock market goes to its lows and rallies nicely there are a few more analysts on Wall Street who race to be the first to say that this is the bottom and investors should put their money to work right away. One of these times they will be right, but up to this point there have been a lot of analysts who have been incorrect countless times. Barry Ritholtz, of The Big Picture Blog, wrote a very interesting post a few days ago that showed just how many bear market rallies there have been since October of 2007. Looking back on each of these events I can plainly remember the financial network media declaring that this was the end of the bear. Remember Bear Stearns and its shocking deal in March? At the time the news media was saying this was terrific news because it was signaling an end to the run on banks. Looking back on that time we see that the S&P 500 was about 35% higher than it is now and the run on banks was only beginning.

Bear market rallies are typically very strong and quick rallies. The thing that makes them so dangerous is that they move so quickly and they make people believe they are missing out on something big. In reality if you look back in history, many of the days the stock market has had its biggest gains were during the worst of bear markets. What is the lesson here? The lesson is that bear market rallies always have lots of power behind them, and there are always plenty of analysts rushing to call the bottom in the stock market. Please remember when you are investing that in the best of bull markets stocks tend to gain gradually and consistently rather than jumping and then plunging constantly. Be very wary of dangerous bear market rallies and the analysts who are “sure” that the bottom is in.